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TaxTMI 
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TaxTMI 
2023 (10) TMI 1310
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....d in law, the order passed under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (the Act") by the Ld. AO is erroneous and bad in law; 2. The Ld AO/TPO/Hon'ble DRP has erred in upholding transfer pricing addition of INR 2,02,60,078 on account of an adjustment to Arms Length Price (ALP) of the international transaction pertaining to payment of interest on FCCDs by the Appellant to its associated enterprise ("AE"), 3. The Ld AO/ITO/Hon'ble DRP erred rejecting benchmarking approach as per Transfer pricing documentation and disregarded judicial precedents relied upon by the Appellant to justify ALP of interest on FCCDs in accordance with Chapter X of the Act. 4. The Ld AD/Hon'ble DRP erred in considering issue of FCCDs as quasi-equity in nature and accepted arbitrary selection of purported comparable instruments by Ld. TPO without cognizance to various comparability factors such as date of issue, type of instrument, issue size, security, tenor, credit rating, etc.; 5. The Ld AO/Hon'ble DRP erred in rejecting the additional analysis submitted by the Appellant based on comparability factors for benchmarking international transaction relating to payment ....
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....ed 18.09.2019 by the assessing officer. The reference has been made for determination of arm's length price in respect of the transaction entered into by the assessee with its associated enterprise as reported in Form 3C EB filed by the assessee. Vide order dated 29.01.2021 passed u/s 92CA(3) of the Act, the TPO has made an adjustment of Rs. 202,60,078/- in relation to the international transactions reported by the assessee in Form 3CEB with its associated enterprises relevant to assessment year 2017-18. 4. The assessee has filed objections before the Dispute Resolution Panel against the variation proposed by the assessing officer in the draft assessment order of Rs.202,60,078/- as a TP adjustment holding that the international transaction of payment of interest of FCCDs to the assessee from its AE was not at arm's length. The DRP vide directions u/s 144C(5) of the Act dated 29.12.2021 rejected the objections filed by the assessee. The assessing officer has passed final assessment order u/s 143(3) on 23.02.2022 and total income was assessed at Rs. 458,34,428/ - after including the transfer pricing adjustment as discussed above. 5. During the course of appellate proceedings before....
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....ment year 2017-18 a sum of Rs. 101,06,120/ - has been determined to be payable by the assessee. The relevant part of the notice of demand is reproduced as under: 8. The ld. Counsel has also filed copy of computation sheet dated 17.03.2021 as per which the total demand payable of Rs. 101,06,122/ - was determined on the basis of draft assessment order for which the impugned demand notice as referred above was issued to the asses see. It is evident from the above that assessing officer has passed the draft assessment order on 17.03.2021 and also issued notice of demand u/s 156 along with computation sheet dated 17.03.2021. These facts demonstrate that assessing officer has not followed the mandatory provisions of Sec. 144C of the Act while issuing draft assessment order along with demand notice and computation sheet in the case of the assessee. In this regard, we have perused the decision of Hon'ble High Court of Karnataka in the case of CIT(IT) Vs. Cisco Systems Services B.V. (2023) 149 taxman.com 486 (Karnataka) wherein held that at stage of passing draft assessment order, the ACIT also issued a demand notice, procedure followed by ACIT was contrary to law and said mistake could no....
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....t to prepaid taxes, if any' and further directing to `Issue notice u/s. 274 r.w.s. 271(1)(c) of the I.T. Act, 1961". A demand notice dated 29-12-2011 was also simultaneously issued, a copy of which has been placed on record by the ld. AR. Then, the AO issued penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act, again, on 29-12-2012, whose copy has also been placed on record. Thereafter, the AO passed the final assessment order dated 27-02-2012 u/s. 143(3) r.w.s. 144C of the Act determining total income at Rs. 156.73 crore. 8. From the above factual matrix, it is seen that the AO passed the draft order by designating it as the "Assessment order" u/s 143(3) of the Act on 29-12-2011 and also issued notice of demand u/s. 156 along with initiation of the penalty proceedings. Thereafter, he passed the final assessment order again characterizing it as `Assessment order' on 27-2-2012. Under such circumstances, the assessee has raised the issue that the final assessment order lacked validity and hence should be quashed as the AO/TPO failed to follow the statutorily prescribed procedure u/s. 144C of the Act. 9. Section 144C of the Act with the marginal note "Reference to Dispute Reso....
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....rmining the tax liability, pursuant to which a notice of demand is issued. Thus it follows that, irrespective of the course of action followed by the assessee, whether or not accepting the variation in the draft order or choosing the route of the DRP or the CIT(A), a draft order has to be necessarily followed by an assessment order on the basis of which a notice of demand is issued and it is then that the assessment is said to have come to an end. 11. The Hon'ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC) has held that assessment order involves determination of income and tax. It laid down that: 'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former.' Again the Hon'ble Summit Court in Auto and Metal Engineers vs. UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income under s. 139 or under s. 142 in response to a notice issued under s. 142(1); (ii) inquiry by the AO in accordance with the provisions of ss. 142 and 143 ; (iii) making of the order of assessment by the AO under s.....
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....3(3) r.w.s. 144C(13), which action came to be disapproved by the Hon'ble High Court. It, ergo, follows that the statutorily mandated procedure must be adhered to by the authorities, non-observance of which renders the assessment order null and void. 14. Similar issue came up for consideration before the Pune Benches of the Tribunal in Skoda Auto India Ltd. Vs. ACIT. In that case also the AO passed the draft order and simultaneously issued notice of demand and initiated penalty proceedings by issuing notice u/s 274 of the Act. It was thereafter that the final assessment order was passed. The assessee challenged the legality of the final assessment order. Vide its order dated 02-07-2019, the Tribunal in ITA No. 714/PUN/2011 has held that the demand got crystallised on passing of the draft order pursuant to issue of demand notice which is contrary to the relevant provision of the Act. Ex Consequent, the draft order was held to be invalid in law and the consequential assessment order void ab-initio. 15. The ld. DR buttressed his point of view by relying on an order passed by the Hyderabad Benches in BS Ltd. Vs. ACIT (2018) 94 taxmann.com 346 (Hyderabad-Trib.) in which it has been....
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....tion of penalty through the draft order carried some infirmity, but that would not impinge upon the validity of the assessment order. 18. To sum up, we set-aside the assessment order by declaring it to be null and void. Thus, the income offered in the return becomes total income of the assessee." 021. We do not find any reason to multiply the several judicial precedents on the facts of the present case. Therefore, respectfully following the decision of the coordinate bench, we also hold that the present assessment order passed is null and void. Thus, the income offered in the return becomes total income of the assessee." We have also perused the decision of coordinate bench of the ITAT on similar issue and identical facts in the case of Marriott International Licensing Company BV Vs. DCIT(IT) 3(2)(1) as referred supra in this order. The relevant part of the decision is reproduced as under: "10. We have heard the rival submissions and perused the material available on record. It is evident that the A.O. had passed a draft assessment order dated 29.12.2016 and had proposed variation to the return filed by the assessee, thereby determining the assessee to be an eligible asse....